Max Hu of ZZ Capital International shared his annual macro update and presented his in-depth investment thesis on Unity Software (US: U) at Asian Investing Summit 2021.
Thesis summary:
Unity Software is the world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content. The main business has been established over the past two decades around game development platforms, especially mobile games.
The company has been part of a duopoly in the global game engine market (along with Epic Games’ Unreal Engine), serving millions of independent game developers worldwide. Unity derives ~15% of revenue from the Greater China region and ~40% of revenue from Asia. It is the dominant platform in China, with more than 60% market share.
Chinese users have the highest engagement globally, surpassing US users, but monetization levels have been low. Unity has been accelerating its Chinese business, with revenue growth amounting to ~80% last year in China. In addition to Chinese growth in the near term, the company is also uniquely positioned to benefit from long-term growth in Virtual Reality.
Unity has a market capitalization of $28 billion and a forward P/S ratio of 27x, a “bubbly” multiple. However, if Max’s prediction about the future of virtual worlds holds true and the company executes well along the way, it may offer a once-a-lifetime investment opportunity, according to Max.
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About the instructor:
Max Hu serves as the executive director for ZZ Capital International, the Hong Kong-based oversea investing platform for the ZEG, a leading Chinese privately-owned investment group with an AUM over 150 billion USD.
Previously, Max was Head of Asset Management for JT Asset Management. He was also the co-founder and fund manager of Tyee Capital Group. He managed Tyee Capital’s global opportunity fund, an equity-based, long-biased multi-strategy fund with a focus on extraordinary businesses. Max’s investment approach is contrarian, long-term, and concentrated. His investments have been focused on easy to understand, wide-moat companies with solid long-term growth prospects. He has worked at Deutsche Asset Management and is a CFA Charterholder.
Max graduated from Tsinghua University in China with a degree in physics and mathematics. He has done Ph.D. research in Financial Economics at ETH Zurich and holds a Masters’s degree from University Heidelberg.
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